The firm as a political actor: The case of British Petroleum

Introduction

The firm or the corporation is an entity or an organisation, whose primary interest is, or should be the making of profit (Friedman, 1993). Therefore, the corporation is primarily an economic entity. At the same time, it is seen that the corporation is also a political actor. In this role, the corporation uses its immense resources and capital to influence political and social changes in the society which are to the ultimate benefit of the corporation and add to its ability to derive the maximum profit for itself. This has led to an interest in the role of the corporations in influencing global politics, which the essay contends, is not unusual, because the unique nature and positioning of corporations as organizational entities, as well as powerful economic and political players in the global economy is a given (Geppert, et al., 2013).

This essay discusses and critically analyses the role of the corporation as a political actor, in particular context of the British Petroleum (BP). Here, it is important to note that the implications of BP as a political actor is relevant to the host economies as well as the home economies. To that end, the essay first discusses the historical and theoretical contexts involved in the nature of corporation as a political actor. Then the essay considers the political influence and actions that are involved in the working of the BP.

Firm as a Political Person: Concept and Theories

The firm or corporation is primarily an organisation that seeks to make profits for its activities, and in that sense it is a body with an economic function. However, over the period of time the firm, in particular the large multinational companies, are viewed as influential political actors. This is not a new viewpoint about corporations. In fact, the earlier corporations such as the East India Company went on to become influential political players, and indeed came to occupy a quasi-governmental role in the colonies by the 18th century (Darlymple, 2015).

The neo-colonialism approach is critical of the corporations’ role as political actors, especially in the third world nations, as these corporations are seen as tools or conduits for the post-colonialism domination of these countries. This is also seen in the fact that in the post war period, whereas many of the older colonies have become independent states, corporations have grown in scope and have come to occupy influential position in these former colonies and the global economy. They have vast pools of resources which are a source of power (Kegley, 2008). Much of these resources also flow from funding by transnational banks (TNBs), which are seen to be influential in the global politics. These banks are also considered to be critical to global financial stability. This is due to part to the fact that TNBs play an important role in the global economic integration. The process of economic integration leads to international interdependence (Kegley, 2008). TNBs fund corporations and this funding becomes an important factor in how corporations are able to shape global politics or politics within a nation (Blanton & Kegley, 2016).

In the recent past, many developing countries of the world have seen greater investments by corporations, which has an undeniable impetus in the development of their economies. Corporations makes these investments into the developing nations for their own greater economic advantage. The two major reasons driving such investments is the availability of cheap labour and the fact that many of these developing nations have abundance of natural resources that can be used for industrial purposes. It can also not be denied that corporations have a sophisticated and advanced levels of technical know-how and machinery, which they bring into the developing nations. The developing nations benefit from this both economically and socially and this becomes an important factor in the ability of the corporation to exert their influence politically and drive policies that would ultimately benefit them.

Corporations are blamed for exploiting the cheap labour and resources of the developing nations; as ultimately this is used to create more power for itself and the ability to create more avenues for exploitation and power generation (Chapman, 2004). In fact, multinational companies have used the available opportunities in the developing nations when the post war period saw the big corporations looking to expand and also find new markets for their products. Cheap labour, lax health and safety laws, and lower taxes in these nations have contributed to the corporations seeking out more investment opportunities in these countries and inevitably creating opportunities for political actions to control the conditions within which these corporations can operate to upmost profitability (Chapman, 2004, p. 66).

Corporations dominate the capitalist world economy, and it is noteworthy that some of these corporations have more political and economic power than the smaller less developed nations of the world (Chapman, 2004). At the same time, the communities are important stakeholders and they may be impacted negatively due to the political and economic activities of the corporations (Calvano, 2008).

This is the age of economic globalization, which means that there is an increasing economic interdependence of national economies globally. This interdependence is seen in the increase in cross-border movement of goods, services, technology and capital.

It is also noteworthy that corporations may also enjoy monopoly in the market, and thus have the greatest possible bargaining power vis a vis the country or the government (Oatley, 2015, p. 189). At the same time, some years after the investment there is a possibility of the investment becoming fixed leading to obsolescing bargain, which favours the country or government (Oatley, 2015, p. 189). Therefore, corporations have to always be politically astute in order to not let the bargaining power shift from themselves to the state. As long as the bargaining power remains with the corporation, it is assured of many benefits and concessions from the state. These may include tax benefits from the host state; tax holidays, which the host state provides as an incentive for the corporation to create a fixed investment (Oatley, 2015). Because the corporation has vast resources, funding, sophistication in technical know-how, etc., the state sees the advantage in aligning its policies to the interest of the corporations, as the latter do generate employment and wealth.

The British Petroleum (BP) Experience

Miliband says that:

“No doubt, the growth of capitalist enterprise, and the coming into being of the multinational giants ... is a major fact in the life of the state, in so far as those who hold power in it have to take the existence of those giants into careful account, to put it very modestly, when they decide upon policy” (Miliband, 2011, p. 109).

The statement is indicative of the interest of the state in the corporation and the consequent consideration of the interests of the corporations when the state is making some policy which impacts the corporation. This is also seen in the experiences of the British Petroleum company (BP).

BP was founded in 1908, primarily for operations in Iran under the concessions granted to the company by Muzzafar al-Din-Shah to William Knox D’arcy in 1901, which was given for a period of sixty years (Ferrier & Bamberg, 1994, p. 27). At that time, the company was to pay a royalty of about 16 percent of its annual profits to the Shah (Ferrier & Bamberg, 1994, p. 27).

From the very beginning of its existence, BP has been in the midst of political actions, which was inevitable in the volatile political conditions of Iran of that period. At this point, it is important to point out that corporations are inevitably drawn into or affected by the politics in a given country, as much of these politics also define the conditions within which the corporations operate. The impacts are felt due to the elements of “government stability, internal and external conflict, corruption and ethnic tensions, law and order, democratic accountability of government, and quality of bureaucracy are highly significant determinants of foreign investment inflows” (Busse & Heffeker, 2007). One can therefore surmise that corporations too would involve themselves into local politics and social environments in order to ensure that local policies, law and practices do not adversely affect its business and profit.

The release of Abdelbaset-al-Magrehi, the Libyan who was convicted for the Lockerbie bombings, is said to have been prompted due to the pressure built by BP over the British government (McElroy & Irvine, 2011). For its part, BP has admitted that it pressed the UK government for a deal over the controversial prisoner transfer agreement amid fears that delays would damage its “commercial interests”, but BP also denied that it has been involved in negotiations concerning Megrahi’s release (McElroy & Irvine, 2011). However, the involvement of BP in these negotiations is also implied from the fact that BP was at the time involved in getting a 900 million dollars deal with Libya, which was complicated by the continued incineration of the Libyan, and the fact that BP was calling the shots in mounting pressure to release him was also admitted to by the then foreign minister, Jack Straw (Bishara, 2013, p. 165).

On the other hand, BP also is known for its corporate social responsibility. It has organised help for AIDS victims in Africa, invested in alternate energy through BP Alternative Energy, launched in 2005, launched a joint venture with GE for the purpose of developing hydrogen power projects (Jennings, 2014, p. 428).

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Conclusion

Corporations’ size, capital and resources ensure that they have a significant impact on government policy, in part by raising the threat of market withdrawal. Because economies are also driven by the presence of such corporations such threats can be used to create more political influence for the corporations. Ultimately, the corporation is not just an economic creature, it is also a political actor, as seen in the context of BP in this essay.

References

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